The development of new market networks in
poor communities requires the kind of
in-depth sensitivity that only comes from a long-
standing commitment from business managers.
homeless entrepreneurs who were once subject to
periodic “street cleansings” by the authorities were
transformed into commercial entities.
All three case studies show that social change can
be generated through new and creative interactions
among private firms, non-profit groups and community organizations. Working together, these players created new business models in which the poor ceased
to be invisible, or someone else’s problem. The initiatives also generated innovation in social services,
stable employment and the social capital required
to develop new institutions and trust. For example,
market initiatives in the shanty towns of Bogotá and
Caracas empowered new community organizations
and social entrepreneurs—particularly women—who
were previously active in the informal economy.
At the same time, the studies reveal that for such
practices to be successful, new corporate cultures
and business practices have to be adapted. The development of new market networks in poor communities requires the kind of in-depth sensitivity toward
those communities—an awareness of what makes
them run—that only comes from a long-standing
commitment from business managers. Skeptics from
business as well as the social sector argue that few
companies have the patience for such long-term commitments, particularly if margins are not immediately similar to those of other ventures.
Moreover, assumptions that developing such
empowerment strategies will benefit the corporate
bottom line are not always likely to prove correct.
Patricia Márquez is a professor at the
University of San Diego and member of
the Latin American Social Network.
Michael Penfold is an associate professor at the
Instituto de Estudios Superiores de Administración
(IESA) and Director of Ecoanalítica in Venezuela.
Creating new markets for goods and services in a sector of the population that not only has little cash to
spare, but is marginalized from the basic services of
a modern capitalist economy can represent a costly
gamble for cautious CEOs. Others add that market initiatives in communities that have few mechanisms
to protect themselves against exploitation may not
be an improvement.
The connection between poverty-fighting and
market strategies is still open to debate. All the same,
the three studies presented below reflect various
types of interdependencies that have to be developed among firms, governments and social organizations in order for market-based initiatives to succeed.
Two conclusions are clear from the research. One is
that a special effort on the part of companies wishing to penetrate these markets is changing corporate
cultures as well as creating new social capital. The
other is that government plays a key role in making
this work. In Belo Horizonte, the municipal government actively promoted the ASMARE project, and the
experience of EDC in Venezuela showed how central
government actions can jeopardize a firm’s ability
to service low-income consumers. Complicating the
problem are Latin America’s built-in tensions: one
of the world’s largest income gaps between rich and
poor, the region’s pervasive informal economy and its
weak institutions. Those tensions make collaborative
efforts between different kinds of organizations not
only crucial, but challenging.
Home Improvement in Colombia2
In 2004, Colcerámica, a successful manufacturer of home-building materials based in
Bogotá, began a home-improvement program targeted at Usme, a low-income neighborhood of some 250,000 residents on the
outskirts of the capital. The initiative, which
involved offering good quality tiles to residents who